Goldman Sachs Raises PCE Forecast, Lowers GDP Outlook Due to Rising Oil Prices

LootboxPhobia · 2026-03-12T21:02:04+00:00

Goldman Sachs has raised its U.S. inflation forecasts and lowered its 2026 growth outlook, warning that soaring oil prices pose a major economic risk. Overall PCE and core PCE for 2026 are expected to be revised upward, while GDP growth projections have been lowered. Due to geopolitical risks, the Federal Reserve may delay rate cuts in the future.

LootboxPhobia

2026-03-12 21:02:04

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Investing.com - Goldman Sachs has upgraded its US inflation forecast and lowered its growth outlook for 2026, warning that rising oil prices related to the Iran war have now become a primary channel of economic risk.

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This week, Goldman Sachs analyst Manuel Abecasis stated in a client report that the firm’s commodities strategist expects Brent crude to average $98 in March and April, up 40% from the 2025 average, then fall back to $71 in Q4 2026.

In the scenario of a full month of flow disruption through the Strait of Hormuz, the firm estimates Brent crude could average $110 in March and April.

Abecasis wrote: “Our rule of thumb is that a 10% sustained increase in oil prices will raise overall and core PCE inflation by 0.2 and 0.04 percentage points respectively, while reducing GDP growth by about 0.1 percentage points.”

Based on revised oil price assumptions and the latest CPI data, Goldman Sachs has raised its December 2026 overall PCE forecast by 0.8 percentage points to 2.9%, and its core PCE forecast by 0.2 percentage points to 2.4%.

The firm now expects GDP growth in 2026 to be 2.2% quarter-over-quarter in Q4, down 0.3 percentage points from previous estimates.

The firm also warns that geopolitical risks have historically suppressed hiring and investment, “and their impact extends beyond just rising oil prices.” Goldman Sachs currently expects the unemployment rate to peak at 4.6%.

A more challenging inflation path suggests the Federal Reserve may wait longer before easing policy. The first rate cut is now expected in September instead of June, with a second cut in December, although Goldman Sachs notes that a weakening labor market could bring the timing forward.

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